Association Between Hospital Private Equity Acquisition and Outcomes of Acute Medical Conditions Among Medicare Beneficiaries

Key Points Question What is the association between private equity (PE) acquisition of short-term acute care hospitals and measures of comorbidity, mortality, readmission, length of stay, and spending among Medicare beneficiaries admitted to the hospital with 1 of 5 acute medical conditions? Findings In this cross-sectional study of more than 21 million Medicare beneficiaries with 5 different acute medical conditions who were hospitalized at short-term acute care hospitals, PE acquisition was associated with significantly lower inpatient mortality (−1.1 percentage points) and lower 30-day mortality (−1.4 percentage points) among patients admitted with acute myocardial infarction. However, PE acquisition was not associated with significant differences in other dimensions of quality and spending or with differences across other medical conditions. Meaning The study’s findings suggest that PE acquisition has mixed consequences for patient-level outcomes overall but is associated with moderate and consistent improvement in mortality among Medicare beneficiaries hospitalized with acute myocardial infarction.


Event study framework
We estimate the period-specific effect of each year relative to acquisition for hospitals acquired by private equity firms the following specification: In this instance, is the outcome measure for a given patient at hospital in year . The indicators 1{ − * = } reflect the time relative to the acquisition year * , and are zeroes in all years for hospitals that are not acquired by a private equity firm. Data from years greater than five years relative to the year of acquisition (i.e., | | ≥ 6), are grouped into a single indicator. The parameter is the pre-or post-treatment period coefficient. The coefficients for the pre-treatment periods (here given by −6 , −5 , −4 , −3 , and −2 ) can be visually examined for parallel trends and formally tested for equality. All years of data were kept in the event-study sample, and the year prior to PE acquisition (i.e., = −1), is the omitted category.
The second term (including the parameter vector ), includes a vector of patient-level controls, , which include patient age, Elixhauser comorbidity index, and indicators for race, sex, admission and entitlement type, and an indicator for any hospitalization in the past year. Hospital fixed effects ( ) and market (hospital service area [HSA]) by year fixed effects ( ) , control for time-invariant hospital-specific unobservables and market-specific time trends, respectively. Standard errors are clustered at the hospital level.

Difference-in-differences analysis
We estimate the reduced-form effect of private equity acquisition on patient outcomes using the following difference-in-differences specification: As before, is the outcome measure for a given patient at hospital in year . is an indicator for the exposure of interest (private equity acquisition) that takes a value of 1 for hospitals which are acquired by a private equity firm, and is an indicator that takes a value of 1 in each year following the acquisition. The parameter is the difference-in-differences estimator, which quantifies the effect of private equity acquisition. As above in the event study framework, the second term in the estimating equation (which estimates the parameter vector ), includes a vector of patient-level controls, . Hospital fixed effects ( ) and market (hospital service area [HSA]) by year fixed effects ( ) , control for time-invariant hospital-specific unobservables and market-specific time trends, respectively. Standard errors are clustered at the hospital level.
All hospitals acquired between 2001 and 2018 are included in the potential treatment group. Observations within three years prior to and following the acquisition were included. Observations from the acquisition year were excluded. All observations from all years of the study period for all potential control hospitals were included. The full sample was restricted to hospitals defined as short-term acute care hospitals (American Hospital Association service code ("SERV" variable) 10), excluding hospitals with a critical access designation.
e. f. a. eFigure 8. Difference-in-Differences Estimates for HCA and Non-HCA Hospitals